Building Erection Services, Inc. v. Jlg, Inc., Terex Corporation, Inc. Powerscreen International, Plc Powerscreen Holdings Usa, Inc. Powerscreen Usa, Inc., Third Party

Citation: 376 F.3d 800Docket: 03-2766

Court: Court of Appeals for the Third Circuit; July 16, 2004; Federal Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Building Erection Services, Inc. (BES) initiated multiple claims against JLG Industries, Inc. (JLG) due to failures of two cranes owned by BES and manufactured by JLG. Despite the crane failures occurring in Missouri, the district court determined that the claims originated in Kansas, invoking Missouri's borrowing statute (Mo.Rev.Stat. 516.190), which led to the application of Kansas's two-year statute of limitations. BES argued that the claims originated in Missouri, where a five-year statute of limitations applies, rendering its claims timely.

BES, a Kansas corporation specializing in structural steel erection using cranes, purchased one new and one used crane from JLG. A failure of the used crane's eyebolt in December 1995 in Kansas City, Missouri, prompted an inspection that revealed a manufacturing defect. Subsequently, in September 1999, the new crane malfunctioned, resulting in property damage and personal injuries, leading to lawsuits against BES from affected parties.

BES filed its lawsuit against JLG on November 21, 2000, seeking damages for both crane failures under claims of strict liability, negligence, and breach of warranty, as well as indemnity for potential liabilities to the homeowners and painters involved in the incidents. JLG subsequently filed a third-party complaint against Powerscreen USA, Inc., claiming it was responsible for BES's claims under an Asset Purchase Agreement. Powerscreen moved for summary judgment, asserting that BES's claims were time-barred under Kansas law. The court's decision resulted in a partial affirmation and reversal, with a remand for further proceedings.

BES challenged the summary judgment motion on the grounds that its claims originated in Missouri due to crane failures occurring there, thus adhering to Missouri's five-year statute of limitations. Alternatively, BES contended that claims related to a second crane failure were timely under Kansas law, as those claims arose when the new crane failed in September 1999 and the suit was filed within two years. The district court, however, sided with Powerscreen, determining that all claims originated in Kansas in January 1996, coinciding with BES's receipt of a metallurgical report indicating a defect in the used crane. The court applied Kansas's two-year statute of limitations, ruling that the statute expired in February 1998, which barred all claims connected to both crane failures. 

On appeal, the review of the summary judgment's basis concerning the statute of limitations is conducted de novo. Missouri's borrowing statute indicates that if a cause of action is barred in its state of origin, it cannot be pursued in Missouri. Missouri law defines the accrual of a cause of action as occurring when damages are sustained and ascertainable. The district court concluded that damage was ascertainable when BES received the report in Kansas, leading it to assert that the claims arose there. 

However, it was noted that BES was aware of damage from the used crane failure on December 18, 1995, in Kansas City, Missouri, which resulted in clear damages. Similarly, BES recognized damage from the new crane's failure on September 30, 1999, in St. Joseph, Missouri, despite not fully understanding the issues at that time. Under Missouri law, a cause of action accrues when any damage is sustained and capable of discovery, even if the extent of the damage is not fully known. The ruling emphasizes that the mere occurrence of some damage suffices for the claim to be actionable.

BES's causes of action did not begin with the expert's report received on January 8, 1996, as that only indicated potential damages. Legal precedent rejects the notion that an injured party's awareness of damage hinges on receiving an expert report. The focus should be on the actual damage, not its cause. The claims accrued in Missouri, where the crane failures occurred and caused physical damage to BES's property, rather than in Kansas, where BES's principal place of business is located. Jurisdictional principles dictate that injury to physical property occurs where the damage happens, which aligns with legal rulings emphasizing the location of the injury over economic effects felt elsewhere. JLG and Powerscreen's reliance on the Rajala case is misplaced; Rajala pertains to a purely economic injury without physical damage, making it inapplicable to the current situation where BES experienced physical property damage in Missouri while feeling its economic repercussions in Kansas.

The determination of injury accrual locations in tort claims hinges on where physical damage occurs versus where economic harm is felt. In this case, physical injuries from crane failures happened in Missouri, while the economic effects were felt in Kansas. Following precedent from Rajala, it is concluded that corporate injuries accrue at the site of physical damage, not where subsequent economic effects are experienced. The appellees' argument that injuries accrued in Kansas, based on advisory reports received there, was rejected as it could lead to forum shopping, which contradicts Missouri's borrowing statute aimed at preventing such practices.

The tort claims related to the crane failures were found to be timely under Missouri law, as they were filed within the five-year limitations period after the incidents. Conversely, the warranty claims presented by BES were deemed untimely despite arguments supporting the applicability of Missouri law and the assertion of an express five-year warranty. Under Missouri's Uniform Commercial Code, warranty breach claims typically have a four-year limitations period, commencing upon delivery, with some exceptions for future performance warranties. However, even granting BES all favorable assumptions, the warranty claims were still considered outside the statutory timeframe.

BES purchased a new crane on October 17, 1991, with a five-year warranty on structural components, expiring on October 17, 1996. BES had until October 17, 2000, to file a lawsuit for any breach, but initiated the suit on November 21, 2000, which was beyond the deadline. BES also acquired a used crane in February 1992, and there is a dispute regarding whether it had a five-year warranty. If it did not, BES had until February 1996 to file a warranty claim; if it did have the warranty, BES discovered the defect, as indicated by a January 8, 1996, metallurgical report, and thus had until January 2000 to bring a claim. Filing on November 21, 2000, was too late regardless of the warranty status. Consequently, the court affirmed the dismissal of the warranty claims but reversed the dismissal of the strict liability and negligence claims, remanding for further proceedings. Additionally, the court noted that the Kansas statute relevant to this case is consistent with the presented facts and denied a motion from Powerscreen to supplement the record.